The weather pattern, which usually begins its four-month journey from the southern state of Kerala on June 1, stalled for three weeks after bringing above-average rains in the first half of last month. The monsoon has now revived, but the delay and low rainfall will hurt the planting of crops such as rice, cotton and soybeans.
This could further boost food prices, which have already pushed India’s retail inflation above the central bank’s 6% upper limit. The progress of the monsoon in the coming weeks is the key to farm incomes and rural demand at a time when the manufacturing and service sectors have suffered due to the coronavirus pandemic. Agriculture accounts for about 18% of the Indian economy.
“The progress of the monsoon during July-August is critical as it has a significant influence on planting and crop yields for the year,” Barclays Plc economist Rahul Bajoria said in a note. A weak planting, coupled with an uneven monsoon, could affect crop yields and agricultural production, “posing upward risks for inflation,” he said.
The monsoon irrigates more than half of India’s agricultural land and supports the livelihoods of millions. The nation is the world’s second largest producer of rice, wheat, and sugar and the world’s leading importer of palm oil. The lack of rain could reduce production and lead to higher imports of basic products.
Total rainfall has been 6% below normal this monsoon season, affecting regions with poor irrigation facilities. The planting of crops such as rice, cotton, corn and legumes has plummeted 12% compared to the previous year, according to the Ministry of Agriculture. July tends to be the month of gambling.
The distribution of rainfall has been uneven. Northwest areas have received 15% less precipitation than usual so far and it was 10% weaker in central regions, where a sizeable harvest is produced, according to the Indian Department of Meteorology. There is also poor humidity in the eastern regions, although the southern peninsula received 20% more rain.
With the Reserve Bank of India’s Monetary Policy Committee set to review interest rates next month, any further setback in the monsoon progress could affect the central bank’s outlook for economic growth and inflation, which it forecasts. a moderation in the coming months.
Dilip Patidar, a farmer in the central state of Madhya Pradesh, said he was “desperately waiting” for the rains to avoid a loss of yield on his 6 hectares (14.8 acres) of farmland where he has planted soybeans, peanuts and corn.
The meteorological office still predicts normal rainfall for the entire season, so it may be too early to talk about the impact on production, according to Prerana Desai, head of research at Samunnati Financial Intermediation and Services Pvt.
“The planting window is still there for most crops,” Desai said. “Still, food prices in India will be strong in the coming months due to rising world prices and delayed rains.”